Initial margin: Difference between revisions
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===See also=== | ===See also=== | ||
*[[Margin call]] | *[[Margin call]] | ||
*Independent Amount, the {{csa}} and the [[CSA Anatomy]] generally | *{{csaprov|Independent Amount}}, the {{csa}} and the [[CSA Anatomy]] generally | ||
*{{tag|EMIR}}, and in particular {{emirprov|uncleared derivatives margin}} | *{{tag|EMIR}}, and in particular {{emirprov|uncleared derivatives margin}} | ||
{{anatomybar}} | {{anatomybar}} | ||
Revision as of 11:00, 29 July 2019
Also known, to ISDAphiles, as Independent Amount and to aggressive predictive text engines as “I’m”, this is the amount of collateral or margin a counterparty requires up front, notwithstanding any change in the mark-to-market value of the transaction.
Compare, by way of contrast, variation margin.
Initial margin and variation margin
Margin comes in two forms.
- Variation margin, or VM, is collateral against the present mark-to-market value of the transaction exposure.
- If you don’t have this and the counterparty goes bust, you’re whistling.
- In many kinds of margin loan, VM will take the form of the asset in question itself.
- Initial margin, or IM, is additional collateral in excess of the present mark-to-market value of the transaction exposure.
- This guards against sudden adverse movements in the value of the collateral or the exposure between margin calls.
- IM is calculated by reference to the expected maximum loss in value of the transaction (and the existing margin) over the margin period.
See also
- Margin call
- Independent Amount, the 1995 CSA and the CSA Anatomy generally
- EMIR, and in particular uncleared derivatives margin
Anatomy™: AIFMD | CASS | COBS | Conference calls | Confis | CRR | CSA | EMIR | Equity Derivatives | FOA PCA | FUND | GMRA | GMSLA | ISDA | OSLA | PB | Swapclear | UCITS